A number of experts from Barclays Wealth and Investment Management have taken part in and shared insights at recent events for the Captive Insurance industry.

The impact of the gradual normalisation of interest rates on Captive Insurers was one of the topics debated at the Bermuda Captives Conference in early June.

Corporate investment adviser at Barclays Wealth and Investment Management, Colleen McHugh, took part in the panel session at the international conference looking at the factors to be considered when establishing a Captive Investment Portfolio, one of them being interest rates.

The annual conference took place from 2 to 4 June and was attended by hundreds of delegates from the Captives industry around the world.

A number of Barclays Wealth and Investment Management specialists were involved in the event including Director of Global Investment Strategy, Henk Potts, who discussed the global financial and economic outlook.

Seminars over the three-day conference covered a range of topics including, Captive trends, an overview of FATCA and the implications and opportunities for Captives as a result of US Healthcare reform.

Ms McHugh along with Jason Moshos from HSBC Global Asset Management and Hugh Barit from PRP Performa Ltd, considered how to enhance returns in a low-yield environment during their panel seminar.

“It was a lively and informative session, where we discussed how to construct and control an investment portfolio for a Captive, to ensure it contributes to the Captive’s success and helps reduce the cost of risk,” said Ms. McHugh.

“The panel considered how to optimise returns in a low-yield environment, how to identify and manage investment risk as economies normalise following the credit crunch and how to prepare for a rising interest rate environment. The session helped to set return expectations and identify investment “red flags”.

“The improvements in the general economy will benefit Captive insurers, however, without any dramatic uptick in interest rates, and even with benign levels of inflation, Captive assets will continue to produce net negative annual returns.

“A diversified approach to investment management should be considered. Captives should incorporate a blend of instant cash, term deposits, money market funds, short maturity bonds, and risk managed equity strategies. This will enhance returns with only limited impact on liquidity and risk.”

Simon Phillips, Head of Captive Insurance at Barclays, also recently spoke at a headline industry event, the Captive Review London Captives workshop. Mr Phillips addressed Captives managers on collateralising their schemes.

Mr Phillips explained Letters of credit (LoC) and Security Trust Agreements and the advantages and disadvantages of both options. The collateral for fronting insurers, attitudes of fronting carriers towards accepting alternatives to LoCs and the loan to value on Letters of credit was also discussed.

“We are continuing to see opportunities for growth and efficiency in the Captives sector,” said Mr Phillips.

“Barclays is very much a part of that and we are continuing to seek ways to share our expertise and to get our messages out about what Guernsey and the Isle of Man can offer owners of Captive insurance structures.”